BOE: Sports big year, will the panel change?

BOE A (000725.SZ) released its first quarter financial report for 2024 after the A-share market closed on the evening of April 29, 2024 Beijing time, with the following key points:

1. Overall Performance: Demand drives price increases. BOE's revenue for this quarter was 45.9 billion RMB, a year-on-year increase of 20.8%; the gross profit margin for this quarter was 14.5%, up 7.7 percentage points year-on-year. The year-on-year growth in revenue and gross profit margin is mainly driven by the increase in panel prices. Considering the panel market price situation, it is believed that the company's current performance is mainly driven by prices, with no significant increase in shipments.

2. Expenses and Operating Conditions: Maintaining above the breakeven line. BOE's inventory for this quarter remained at a relatively reasonable level, and expenses continued to remain stable. The company's net profit attributable to shareholders this quarter was 0.98 billion RMB, the company's profitability is mainly influenced by the gross profit margin, and its operations continue to remain above the breakeven line.

Dolphin's Viewpoint:

Overall, BOE's financial report this time is in line with expectations. Both revenue and gross profit margin have rebounded year-on-year, mainly benefiting from a 20%+ increase in panel prices during the same period. Expenses are stable, inventory is within a reasonable range, and profits remain above the breakeven line. In addition, the 0.98 billion RMB profit for this quarter is not all from core operations. If we only look at the profit from core operations, the company only made 0.23 billion RMB this quarter. Although panel prices have been rising for over half a year, the company's operations have just returned to above the breakeven line.

What is more worth paying attention to for the company is the current changes in panel prices. Prices not only directly affect the company's performance but also reflect the market's supply and demand situation. Starting from March, panel prices have seen another increase. It is believed that this increase is different from the price hikes initiated by manufacturers in the second half of last year. This time, it is driven by demand, mainly benefiting from 1) the stock-up demand during the 618 shopping festival and 2) the boost from events such as this year's Olympics and the European Championship. With the recovery in demand, the company's performance will continue to benefit from the price increases.

The following is Dolphin's specific analysis of BOE:

1. Overall Performance: Demand drives price increases

1.1 Revenue End

BOE's total revenue in the first quarter of 2024 was 458.9 billion RMB, a year-on-year increase of 20.8%, exceeding market expectations (440 billion RMB). The company's quarterly revenue has exceeded 45 billion for three consecutive quarters, indicating that it has emerged from the bottom The company's current revenue growth is mainly driven by price increases. Revenue in the current quarter increased by 20.8% year-on-year, and the prices of large panels of all sizes in the first quarter compared to last year also increased by more than 20%.

When observing the price changes of large panels, it is different from the continuous price increases in the second half of last year. There was a phase of consolidation in panel prices in the first quarter. Dolphin believes that the previous rise in panel prices was mainly due to 1) proactive price increases by panel factories after prices fell below costs; 2) demand for replenishing inventory in the industry chain. The subsequent price increase after the consolidation phase is more driven by demand.

1.2 Gross Profit

BOE achieved a gross profit of 6.65 billion yuan in the first quarter of 2024, a year-on-year increase of 155.8%. The gross profit margin for this quarter was 14.5%, an increase of 7.7 percentage points year-on-year. The year-on-year increase in gross profit margin this quarter is mainly due to the rise in panel prices. The current level of gross profit margin has brought the company's profit back above the breakeven line.

1.3 Panel Prices

BOE's revenue and gross profit margin growth year-on-year are mainly affected by the increase in panel prices. So, how have panel prices performed?

According to Witsview's late April pricing, the prices for 65-inch/55-inch/43-inch/32-inch panels are $176/$129/$65/$37 respectively. Although panel prices stagnated earlier this year, prices started rising again in March. Prices for panels of various sizes have risen by more than 35% from the bottom.

Dolphin believes that the previous rise in panel prices before the first quarter was driven by the supply side. Various manufacturers reduced capacity utilization rates, thereby proactively raising panel prices. After replenishing inventory in the industry chain, the previous price increase stalled due to no significant recovery in downstream demand.

Starting from March, panel prices have started rising again. Dolphin believes that this time it is due to demand-side factors. On one hand, driven by the demand for stocking up during the 618 peak season, and on the other hand, this year will also be driven by major events such as the Olympics and the European Cup. With the continued recovery of demand, panel prices are expected to continue to rise

2. Expenses and Operating Conditions: Maintained above the breakeven line

2.1 Operating Indicators

For cyclical industries, focusing on inventory and operating indicators is more important.

① Inventory Situation: This quarter was 24.026 billion yuan, a decrease of 0.4% compared to the previous quarter. The inventory/revenue ratio for this quarter remained at 0.52. The supply-demand relationship has significantly improved, and the company's inventory level has returned to a reasonable level.

② Accounts Receivable Situation: This quarter was 30.202 billion yuan, a decrease of 10.5% compared to the previous quarter. The accounts receivable/revenue ratio is 0.66, showing a slight decline.

2.2 Expense Ratio

In the first quarter of 2024, BOE's total expenses amounted to 5.816 billion yuan, a year-on-year decrease of 17.2%. The expense ratio was 12.1%. Both sales expenses and financial expenses declined this quarter.

1) Sales Expenses: This quarter was 0.996 billion yuan, a 6.9% year-on-year increase, with a sales expense ratio of 2.2%. The company's sales expenses have increased with revenue but have remained stable overall.

2) Administrative Expenses: This quarter was 1.457 billion yuan, a 2.2% year-on-year increase, with an administrative expense ratio of 3.2%. Overall, it has been maintained at a relatively stable level.

3) Research and Development Expenses: This quarter was 2.726 billion yuan, a 2.5% year-on-year increase, with a research and development expense ratio of 5.9%. Research and development expenses account for the largest proportion of the four expenses and continue to be invested steadily.

4) Financial Expenses: This quarter was 0.19 billion yuan, a 57.7% year-on-year decrease, with a financial expense ratio of 0.4%.

2.3 Net Profit

In the first quarter of 2024, BOE achieved a net profit attributable to the parent company of 0.98 billion yuan, a significant year-on-year increase in profit.

Due to non-operating factors affecting net profit attributable to the parent company, there may be deviations from the company's core business operations. If we consider the pure operational aspect (excluding non-operating influences), BOE's profit for this quarter is around 0.23 billion yuan. The change in operational profit this quarter is mainly influenced by panel prices and gross profit margins.

The company's net profit margin in the first quarter of 2024 was 1.1%, continuing to be maintained above the breakeven line. Due to the company's stable expenses, changes in profit and loss are mainly influenced by gross profit margins. With the rise in panel prices, there is hope for an overall improvement in the company's performance

Dolphin Investment Research's historical articles on BOE Technology:

Earnings Season

April 1, 2024 Company Exchange Meeting "BOE Technology: Good Growth and Profitability of Panels in the Next 3 Years (23Q4 Exchange Meeting)"

April 1, 2024 Earnings Review "BOE Technology: Panels Price Increase Again, Is It Really Coming Back This Time?"

October 31, 2023 Earnings Review "BOE Technology: Price Increase is Not a Real Recovery, Demand is the Key"

August 28, 2023 Earnings Review "BOE Technology: Real Price Increase, False Recovery"

April 28, 2023 Earnings Review "BOE Technology: Expectations of Recovery Already Met, Can the Peak Season Stage a Comeback?"

April 6, 2023 Earnings Review "BOE Technology: Surviving the Survival Game, Now It's All About Reading the 'Demand' Signals"

October 31, 2022 Earnings Review "BOE Technology: Three Signals of Bottoming Out and Recovery"

August 31, 2022 Earnings Review "BOE Technology: Buying Not Performance, But Cycle Reversal"

In-depth Analysis

July 26, 2022 Company In-depth Analysis "A 360-Degree Breakdown of BOE Technology: Why Short-Term Risks Do Not Affect Long-Term Value"

July 5, 2022 Industry In-depth Analysis "From Double 'Bulls' to Double 'Bears': Have BOE Technology and TCL's Cycle Challenges Come to an End?"

July 21, 2021 Top Judgment "Panel Cycle Peaks, No Bottom to Buy" Risk Disclosure and Disclaimer for this article: Dolphin Research Disclaimer and General Disclosure